Pension system under pressure: increasing pension contributions required

Pension system under pressure: increasing pension contributions required

The aging population in Germany is putting the pension system under increasing pressure. The traffic light coalition is planning measures to stabilize pensions with the pension package II. Due to the impending retirement of the baby boomer generation, fewer and fewer workers will have to finance the increasing proportion of pensioners in the coming years, which will increase the financial burden on the pension system.

According to the plans of the pension package, the pension contribution rate is to rise from the current 18.6 percent to 22.3 percent by 2045, which corresponds to an increase of a fifth. This step is intended to ensure that the pension level is maintained at 48 percent. In addition, the government plans to invest at least 200 billion euros on the capital market by the mid-2030s to support the pension fund.

Another planned measure is the introduction of so-called generation capital, also known as stock pension. This fund is intended to relieve the burden on working people by using ten billion euros annually from a total capital of around 200 billion euros to stabilize pension contributions until 2045. This is intended to support future contributors and keep the contribution rate at 22.3 percent instead of increasing to 22.7 percent. The planned relief of around 0.4 percentage points per year is intended to benefit both employees and companies.

However, employer president Rainer Dulger expressed concerns about the pension plans and warned that the state and society would be overwhelmed. He described Pension Package II as the “most expensive social law of the century” and called for the plans to be stopped. Dulger considered it unfair and unjust to spend an additional 500 billion euros on pensions over the next two decades, especially given the impending rapid aging of the population in Germany.